Only two games in and properly deciding that the lose of the icon doesn't change anything is a great start! No joke. The icon thing is a common question among new players.
As an additional note, you mention that "Then Player 2 plays Locked Away to make one of the characters loose the Military Icon." Just to be clear, as an attachment, it would need to be played during the marshalling phase. Then, during any Player Action Window (which is described in the FAQ), that player can kneel an influence to remove an icon of their choice. Like Khudzlin mentioned before, there is an opportunity for player actions before a challenge is initiated, so that is a good time to use Locked Away's ability - to keep a character from being eligible for a challenge.
For quick reference, the FAQ can be found here.
Also, if you get extra zealous, over on cardgamedb another player has created a "Comprehensive New Player Guide" post, which can be found here. It is an excellent source of info.
Welcome to the game!
Edited by Slothgodfather, 12 August 2014 - 08:30 AM.